Shell drops plans for LNG

Shell has halted plans to build a liquefied natural gas terminal that spawned controversy over the environmental impact of technology that would have been used at the port.

Greg Koehler, project director for Shell's Gulf Landing, said the decision to stop the project, which had been licensed and was in early stages of development, was driven by the market.

"The (nation's) regasification capacity is adequate to handle everything coming into the U.S.," Koehler said Wednesday. Koehler cited several onshore LNG terminals that are either built or under construction in Texas and Louisiana, as well as an offshore port in Mexico.

Koehler notified the Coast Guard of its decision on Tuesday, he said.

Gulf Landing, which was to be built 38 miles south of Cameron Parish, joins four other offshore open-loop LNG projects proposed for the Gulf of Mexico that have been pulled off the drawing board by companies for various reasons. Only one remaining open-loop port is still being proposed off Alabama's coast. That port has not been licensed.

Decision welcomed

Environmentalists and conservationists cheered Shell's decision.

"It's good for the fish, and it's good for the fisherman," said Jeff Angers of the Coastal Conservation Association.

The CCA, along with the Gulf Restoration Network, the Sierra Club and the Louisiana Charter Boat Association, had been fighting plans for so-called "open loop" LNG ports that would use billions of gallons of seawater to warm the supercooled gas that is brought to the United States on tankers.

The groups have said the technology would hurt Gulf fisheries.

"This was the news we were hoping for. Shell did the responsible thing," said Aaron Viles of the Gulf Restoration Network.

Last year, Gov. Kathleen Blanco vetoed an open-loop port proposed by McMoran Exploration off Louisiana's coast because, she said, too little was known about the impact it would have on fisheries.

McMoran revised the project to use gas, rather than seawater, to warm the gas.

Blanco, though, allowed the Shell project before fisheries scientists and environmentalists raised public awareness of the possible impacts of the open-loop system. While the Maritime Administration issues the licenses, governors affected by the port have the option to veto such offshore ports.

A second port still on the drawing board, TORP Technology's Bienville Offshore Energy Terminal, proposes using an open-loop system with modifications. But Alabama Gov. Bob Riley has already voiced opposition to using the open loop technology and threatened to veto other companies plans for open-loop terminals.

"This decision shines a single bright light on the only applicant pursuing open loop," Angers said.

Since Shell US Gas & Power LLC received its license in 2005, environmental groups have tried various tactics to stop Shell's plans, from filing a lawsuit in federal court to flying airplane banners at the New Orleans Jazz and Heritage Festival to going to The Hague to appear at a board meeting of Royal Dutch Shell to protest the plans.

Koehler said such outside pressures did not affect Shell's decision. He said they had worked diligently with several groups, including the CCA, to study and limit any impacts on the Gulf fisheries.

"We're in this period of natural fallout of proposals and applications to the actual number that's needed," he said. "It's been said since day one that the markets will determine which (terminals) will get built."

Demand for LNG

There has been a rush to get LNG terminals licensed as the growing demand for natural gas is predicted to outstrip by 21 percent the country's ability to supply itself by 2030, Cooper said.

David Dismukes with Louisiana State University's Center for Energy Studies said that a lot of projects won't get built because of the tremendous cost of such projects, which can be in excess of $3 billion.

"You know that not all of those projects are going to be built. There's a lot of testing of the market," he said.

Koehler said Shell still believes that there is a need to provide LNG, but the company has other avenues to provide the liquefied gas with rights at terminals being built in Maryland and Georgia.

"We're very bullish on LNG. We see it as a growing market and want to be part of that market," he said.

Pam Radtke Russell can be reached at prussell@timespicayune.com or (504) 826-3351.